Eurozone: Tightening Labor Market Puts Pressure on Inflation

(14 January 2022) Labor market conditions in the eurozone (EA19) — the E.U. member countries that use a shared single currency, the euro — improved in November, as unemployment fell to a record low since the COVID-19 pandemic started in March 2020. (December 2021 unemployment data will be released in February.) 

• The eurozone registered a decline of 222,000 in the number of unemployed people in November compared to October, with the total down to 11.8 million. The unemployment rate fell from 7.3% to 7.2% for the same period. 
• The lowest unemployment rates were registered by the Netherlands, 2.7%, and Germany, 3.2%. The highest unemployment rates in the eurozone were observed in Spain, 14.1%, and Greece, 13.4%.
• Amid the tightening labor market and increasing labor costs, consumer price inflation in Europe hit the highest level in more than two decades. In November 2021, the annual rate of CPI inflation accelerated to 4.9%, and core inflation (the overall index excluding energy, food, alcohol and tobacco) jumped to 2.6%.

The furlough programs in place, which have limited the pandemic's impact on the labor market, and strong demand for labor will likely help to improve the market in coming months. However, the rise in new variants such as Omicron may have negative impact on the labor market and the economy.